Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $210,600 and the following divisional results. Division I II III IV Sales $245,000 $197,000 $504,000 $450,000 Cost of goods sold 200,000 192,000 301,000 249,000 Selling and administrative expenses 72,400 63,000 58,000 50,000 Income (loss) from operations $ (27,400) $ (58,000) $145,000 $151,000 Analysis reveals the following percentages of variable costs in each division. I II III IV Cost of goods sold 73 % 91 % 82 % 75 % Selling and administrative expenses 39 59 50 61 Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued. Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Contribution margin $ $ $ Fixed costs Cost of goods sold Selling and administrative Total fixed expenses Income (loss) from operations $ $ $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $210,600 and the following divisional results.

	Division
	I	II	III	IV
Sales	$245,000	$197,000	$504,000	$450,000
Cost of goods sold	200,000	192,000	301,000	249,000
Selling and administrative expenses	72,400	63,000	58,000	50,000
Income (loss) from operations	$ (27,400)	$ (58,000)	$145,000	$151,000

Analysis reveals the following percentages of variable costs in each division.

	I		II		III		IV
Cost of goods sold	73	%	91	%	82	%	75	%
Selling and administrative expenses	39		59		50		61

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

	Continue	Eliminate	Net Income Increase (Decrease)
Contribution margin	$	$	$
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations	$	$	$

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